Another big U.S. retailer is adding CBD products to store shelves.
Cannabis company Green Growth Brands (CSE:GGB) is partnering with Abercrombie & Fitch Co. (NYSE:ANF) to sell hemp-derived CBD bath bombs, lotions and lip balms and other body-care products. The products will be sold in 10 stores in Colorado, Massachusetts, California, and Nevada and will come from Green Growth’s Seventh Sense Botanical Therapy brand.
It’s a big opportunity for Green Growth to grow its brand by having its products available in Abercrombie & Fitch stores. The company has ambitious plans for Seventh Sense, as it looks to open more than 100 locations across the U.S., in what it says will be “prime shop locations.”
The investments we are making in securing premium leases and in designing beautiful shop fixtures not only create amazing consumer experiences but are fantastic marketing mechanisms for our brand. With our eventual footprint of hundreds of shops in high foot traffic locations, we will be gaining exposure to millions of potential customers
– Peter Horvath, CEO of Green Growth
The goals may seem lofty for a company that has seen minimal sales, and rapid expansion will put extra pressure on the company’s cash position. With US$31 million in cash flow as of December 31, Green Growth has some resources to work with, but they may not last long, given cash burn is a problem for many companies in the industry. Investors will want to keep an eye on upcoming quarters how well Green Growth is generating cash. Otherwise, it may need to resort to issuing shares which will only dilute shareholders and drive the stock down.
The challenges Green Growth face may get even more difficult as competition in the industry starts to ramp up with the passing of the U.S. farm bill last December allowing topical hemp derived CBD products to enter the market.
More competitors on the way?
Although not all CBD products have been approved for sale under the farm bill, it’s up to individual states to set up programs to manage what products are permitted. And while the U.S. Food and Drug Administration hashes out regulations for edible CBD products, the new law is still a big win for the industry and has led to more companies from other industries showing an interest in the CBD market.
Last month, consumer goods company Unilever (NYSE:UN) made a small push into the CBD space through one of its subsidiaries, showing signs major companies are starting to accept the potential of hemp product market. Schmidt’s Naturals, which was acquired by Unilever in 2017, will introduce a deodorant infused with CBD, which may send signals to Green Growth that competition is intensifying in personal care products and other segments looking to capitalize on the CBD buzz.
Adding CBD to products seems to be a way for companies to generate some excitement and create new products to attract a larger consumer base, especially those who are struggling to raise cash. Developing partnerships with established retailers and consumer goods companies is crucial for cannabis companies to stand out from other brands, which is why it may be a big win for Green Growth to have already secured a deal with Abercrombie & Fitch early on.